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Thoughts about economic and business issues by and for the NYU Stern community -- and others with similar interests. The content reflects the views of individual NYU faculty but not necessarily those of NYU. Comments and suggestions welcome. Special thanks to our tech consultant, MBA alum Tim Reilly.

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Sue Google?

October 18, 2012

Industry insiders claim that the Federal Trade Commission (FTC) is preparing a recommendation that the government sue Google. (See this link or this one.) Will this turn into another Microsoft-type trial?

There are a number of interesting parallels between Google in the 2010s and Microsoft in the 1990s. First of all, both are dominant firms in a variety of markets. Second, their dominance stems from a superior asset subject to some form of “network” effects: Microsoft’s Windows OS and Google’s search engine.

Third, there is is the issue of “leveraging power.” Isaac Newton famously acknowledged that “If I have seen further it is by standing on the shoulders of giants.” By contrast, the Microsoft of the 20th century and the Google of the 21st century have been accused of “standing on the shoulders of babies:” levering their power to effectively appropriate the innovation value created by small startups. Whether this is true, legal, or efficient is an interesting topic – actually, three different research topics.

If the Microsoft-Google parallel applies, we should also expect that the European Commission will play an important role in the proceedings. In fact, differently from Microsoft, when it comes to Google the European Commission is ahead of the game.